Effects of Hub-and-Spoke Free Trade Agreements on Trade: Panel Data Analysis

Joseph Alba (), Jung Hur and Donghyun Park
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Joseph Alba: Nanyang Technological University

No 127, ADB Economics Working Paper Series from Asian Development Bank

Abstract: Overlapping free trade agreements (FTAs) have given rise to hub-and-spoke FTAs that may promote trade by giving an export advantage to the FTA hub country. We empirically investigate the effect of hub-and-spoke FTAs on trade using panel data consisting of 99 countries and covering the period 1960–1999. Our empirical analysis of the panel data yields three notable findings. First, FTAs have a significant and positive impact on trade. Second, hub-and spoke FTAs increase trade above and beyond FTAs, and thus reinforce the trade-boosting effects of FTAs. Third, our results imply an annual growth rate of 4.9% in bilateral trade and hence a doubling of trade after 14½ years between FTA partners. Our results indicate that the hub-and-spoke nature of FTAs has a positive effect on trade, in addition to the direct, trade-liberalizing effect of FTAs. Therefore, in a world of overlapping FTAs, a more accurate empirical analysis of the relationship between FTAs and trade calls for taking into account the hub-and-spoke characteristic of FTAs.

Keywords: bilateral trade; free trade agreements; hub-and-spoke; panel data; trade-boosting effects (search for similar items in EconPapers)
JEL-codes: F13 F14 F53 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2008-10-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Effects of Hub-and-Spoke Free Trade Agreements on Trade: A Panel Data Analysis (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0127

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